Recession takes big bite out of CEO compensation

Steve Adams

Saturday

Jul 10, 2010 at 12:01 AMJul 10, 2010 at 10:14 AM

Jim Moniz, president of compensation consultancy Northeast VisionLink of Braintree, says executive salaries have declined significantly in the construction and engineering industries, which have been disproportionately hurt by the real estate downturn.

With the global economy in a full-scale contraction and revenues at Norwood-based computer chip maker Analog Devices off 22 percent, CEO Jerald Fishman’s annual pay dropped by more than half to under $3 million in 2009. Fishman is among a dozen CEOs of local publicly-traded companies whose annual compensation fell – in some cases dramatically – last year, according to SEC filings. Eight others, including Talbots CEO Trudy Sullivan, got raises as their companies bucked the receding economic tides.

Local companies’ pullbacks on pay was mirrored nationally as executive pay declined for the second straight year, according to two studies.

Median total compensation for North American CEOs declined 3 percent in 2009, according to an analysis of 823 public filings by The Corporate Library, a Portland, Maine-based corporate governance research firm.

The biggest declines occurred at large companies, with the average salary of the CEO at an S&P 500 company dropping more than 11 percent.

Bonuses – which are tied to short-term performance – have dropped substantially, said Paul Hodgson, senior research associate at The Corporate Library.

Because most companies’ stock prices have dropped in the last two years, fewer executives have exercised stock options and those who did made less money, Hodgson said.

Jim Moniz, president of compensation consultancy Northeast VisionLink of Braintree, said executive salaries have declined significantly in the construction and engineering industries, which have been disproportionately hurt by the real estate downturn. Companies with revenues of $10 million or less are reluctant to increase executive pay, he said.

They’re also more likely to ask for peer studies comparing an executive’s pay with others in the same industry.

“Boards are focused in on appropriateness,” Moniz said. “If they’re looking at a key executive, they need to be able to tell ownership or shareholders why this guy’s making this much money.”

The extraordinary economic conditions in 2009 prompted some unusual compensation cutbacks at local companies.

Analog’s compensation committee froze base salaries for top executives and required them to take five weeks of vacation.

All of Braintree-based power equipment manufacturer Altra Holdings’ executive officers agreed to temporary salary reductions in 2009, including CEO Michael Hurt, whose base pay shrunk from $580,000 to $250,000. Hurt’s total compensation dropped from $2.2 million to under $400,000.

Boston Beer Co. founder and chairman James Koch agreed to a freeze of his $273,000 salary, citing the economic climate, while Boston Beer CEO Martin Roper’s salary remained steady at $666,750.

Some companies rewarded executives for steering them through troubled times. Talbots CEO Trudy Sullivan benefited from the company’s improving financial stability in 2009.

While Sullivan’s base salary remained unchanged at $1 million, the board gave her a $240,000 bonus and $290,000 in stock options. Sullivan presided over a restructuring of the women’s apparel chain’s finances last year that has since restored the company to profitability.

Another study by the AFL-CIO’s Office of Investment found that average total compensation declined 9 percent to $9.25 million at 292 companies in the Standard & Poor’s 500 index.

One area where executives fared better in 2009 was retirement benefits, which increased by an average of 23 percent, the study found.

Ronald Logue, who retired as CEO of State Street Corp. on March 1, has accumulated nearly $35 million in three company-sponsored retirement plans. Logue can begin collecting the bulk of the money in three-year installments beginning in September.

Brandon Rees, deputy director of the AFL-CIO Office of Investment, said such so-called “top hat” plans for executives are inappropriate in an era where many companies are converting rank-and-file employees’ pensions into self-funded 401(k) plans.

“The people who can most afford to take risk because of their high salaries are seeking the greatest guarantees for their retirement incomes at shareholders’ expense,” Rees said.

In contrast, executives at Braintree-based Haemonetics Corp., which makes blood storage equipment, participate in the same 401(k) plan as the rest of the company’s U.S. employees. Haemonetics does not offer any defined-benefit pension plans for U.S. executives.

As part of its company-wide belt-tightening, Talbots in February 2009 froze its executive retirement plans and their benefits stopped accruing on May 1.

Hodgson, of the Corporate Library, predicted that compensation will begin to inch up again in 2010 as the economy stabilizes and companies give executives retention rewards.

“Those companies that have had two years in which they’ve not paid out bonuses, even if they haven’t hit the target (in 2010), maybe they’ll want to give them a bonus because they’re still there,” he said.

Steve Adams may be reached at sadams@ledger.com.

Ronald Logue, CEO, State Street Corp., Boston

Salary: $1 million

Non-equity incentive plan: $5.4 million

Change in pension value: $1.5 million

All other compensation: $143,594

2009 total: $8 million

2008 total: $24.5 million

Other compensation includes executive health screening, financial planning and tax services, matching charitable contributions to charity, a company car, driver and security specialist and home security service.

T. Michael Miller, CEO, OneBeacon Insurance, Canton

Salary: $500,000

Bonus: $3.2 million

Stock awards: $1.4 million

All other compensation: $135,554

2009 total: $5.2 million

2008 total: $8.1 million

Brian Concannon, CEO, Haemonetics Corp., Braintree

Salary: $546,197

Bonus: $200,000

Stock awards: $369,763

Option awards: $1.7 million

Non-equity incentive plan: $350,708

All other compensation: $6,300

2009 total: $3.2 million

2008 total: $1.3 million

Jerald G. Fishman, CEO, Analog Devices, Norwood

Salary: $930,935

Non-equity incentive plan: $635,900

All other compensation: $1.37 million

2009 total: $3 million

2008 total: $6.5 million

Other compensation includes deferred compensation plan, estate and tax planning.

Trudy F. Sullivan, CEO, Talbots Inc., Hingham

Salary: $1 million

Bonus: $240,000

Option awards: $290,005

Change in pension value: $47,144

All other compensation: $1.4 million

2009 total: $3 million

2008 total: $2.5 million

Other compensation includes $1.2 million retirement benefit, auto allowance, financial counseling, residential security and parking expenses, and a housing allowance to maintain residences in Boston and New York.

Peter Chase, CEO, Chase Corp., Bridgewater

Salary: $484,254

Bonus: $398,353

Stock awards: $988,640

Non-equity incentive plan: $165,857

Change in pension value: $838,689

All other compensation: $62,016

2009 total: $2.9 million

2008 total: $3.2 million

Other compensation includes retirement plan contributions, life and long-term disability insurance premiums, auto allowance and private club membership.